Daimler Trucks sales fell 4% globally in the first 11 months of 2019, as sales in Europe and North America contracted faster than expected, prompting “wide-ranging structural measures” to reduce production and improve profitability.
“For two years, until the third quarter of last year, we had an unusually high market,” Ola Kallenius, chairman of Daimler AG (OTC: DDAIF), said at a media roundtable on January 7 at CES 2020. “We knew at some point there had to be normalization. In a weird way, it’s almost as good.
Producing complete works only for so long before supply chain disruptions and other problems arise.
For example, Daimler Trucks North America struggled with a lack of capacity to meet growing demand in late 2018 and early 2019, resulting in a significant market share loss in heavy-duty and medium-duty trucks. During the third quarter of 2019, its heavy duty share decreased by 3% and its medium duty share decreased by 7%.
Daimler Trucks reported industry-leading sales of 446,800 units across its Mercedes-Benz, FUSO, Freightliner, Western Star, Thomas Built Buses and BharatBenz brands through November 2019. The final figures will be included when Daimler announces full-year earnings for the business Own cars and trucks. On February 11th.
In Europe, sales in the period from January to November 2019 fell by 5% compared to the same period last year to 72,400 units.
Job cuts
Daimler said in late November 2019 that it would cut 10,000 jobs globally by 2022 to free up the money it needs for investments in electric vehicles for Mercedes-Benz’s passenger car and light truck business.
Daimler Trucks North America cut 900 jobs at two plants in North Carolina and about 200 jobs in Mexico in October 2019, as a slowdown in orders reduced production. At the time, sales in the United States, Mexico and Canada were at 8% ahead of the first 10 months of 2018. But they fell 16% in November.
Quinn Washington Research Group expects a 36% decline in production in 2020, a larger decline than ACT Research, a leading commercial vehicle forecasting firm. Quinn lists 10 reasons, including re-timing orders for later production.
This actually happens because the abundance of used trucks drives down prices, causing fleets to wait to get rid of old trucks until prices improve.
“I would say that the big players act very rationally, very reasonably,” Kallenius said. But at the same time, the economy and those kinds of things are affected by the public mood. Volatility and uncertainty are usually not a good thing.”
A decline in new truck orders in 2019, the lowest in a decade, left a backlog of new truck orders in North America of just 123,000 at the end of December compared with 297,000 a year earlier, according to ACT Research. Both numbers were extreme for a cyclical industry.
Most truck manufacturers point to a recovery in orders in the second half of 2020. But no one is sure.
“In the truck business, we have fleet companies, so you kind of know your customers,” Kallenius said. “If they want to stay on the sidelines for six, nine or even 12 months, they can do that. But then there comes a point where you have to file again.
Unsatisfactory returns
The truck manufacturer is not satisfied with its 2019 sales revenue, said Martin Daum, Chairman of the Board of Management of Daimler Truck AG.
“We have therefore initiated extensive structural measures to increase our margin to at least 7% by 2022,” he said. “In 2020, we will significantly improve our cost position while continuing to invest in the future.”
This future includes “significant investment” in a CO2 neutral fleet equipped with electric drive systems and in the automation and connectivity of trucks and buses.
Some of this will be achieved by reducing variable costs at Mercedes-Benz Trucks in Europe and Latin America by $277 million and employee costs by $330 million. Daimler will reduce the number of vehicle platforms in Brazil from eight to three while modernizing the remaining portfolio to return to profitability.
